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2008 glitters for Barrick Gold

Barrick Gold Corp. (TSX: ABX ) says it is bullish about its 2008 prospects despite a &#34;challenging&#34; cost environment that led to a drop in third-quarter profit for the world&#39;s largest gold miner.

Thu., Nov. 1, 2007

Barrick Gold Corp. (TSX: ABX) says it is bullish about its 2008 prospects despite a "challenging" cost environment that led to a drop in third-quarter profit for the world's largest gold miner.

"We have been working over the last number of years to position the company to be able to prosper in the strong gold price environment," CEO Greg Wilkins said during a conference call with analysts Thursday.

Toronto-based Barrick, he said, was "poised for further margin expansion and profitability" and believes gold prices will remain high with "fundamentals are in place for a sustained rally."

"We'll continue to see good numbers and good margins going into the fourth quarter and next year."

Mark Smith, an analyst with Dundee Securities Corp., said Barrick should be able to benefit from current gold prices in the short term despite having some hedging.

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"While the company's near-term outlook looks reasonably strong and they should be able to fully participate in higher gold prices, there remains an overhang of a 9.5 million (ounce) project hedge book allocated to future projects that at the end of the third quarter had a $4 billion negative market-to-market value," he said.

Last April, Barrick announced plans to eliminate its corporate gold sales contracts. Barrick had said at the time that the move to eliminate its hedge book – which committed the company to selling part of its gold output to some customers at lower than market prices – means the company can benefit from prevailing spot prices for all its gold production from existing mines.

On Thursday, the December gold bullion contract price was at US$788.30 an ounce.

Barrick, which has mines around the world and reports in U.S. dollars, reported late Wednesday that it had a third-quarter profit of $345 million, down from $405 million as higher costs and a lower number of ounces sold offset a rising price of gold. Sales for the quarter were $1.68 billion, up from $1.56 billion last year.

"It's a challenging environment," Wilkins said.

"We're very pleased that our quarter came in pretty much on expectation."

In its outlook for 2007, reiterated Wednesday, Barrick said it expects full-year production of approximately 8.1 million ounces of gold at total cash costs of about $350 per ounce and 400 million pounds of copper at total cash costs of about 90 cents per pound, in line with its previous guidance.

But, Wilkins said Thursday that several issues, including a labour disruption at the Bulyanhulu mine in Tanzania and cost pressures associated with higher fuel prices "may or may not affect" Barrick's ability to meet its guidance estimates.

The results follow an announcement Monday that Barrick had signed a friendly deal to buy Arizona Star Resource Corp. (TSXV:AZS) for C$773 million in a friendly deal that will give it control of the Cerro Casale deposit in Chile, one of the world's largest undeveloped gold and copper projects.

Barrick already has major operations in South America, including the Zaldivar copper mine in Chile, the Pascua-Lama gold-silver project in Chile-Argentina, the Veladero gold mine in Argentina and the Lagunas Norte and Pierina gold mines in Peru.

Wilkins said he was optimistic about getting the required approvals for the Pascua-Lama project in the Andes – which has come under fire in the past over accusations the gold and silver mine project is displacing indigenous populations and harming the local environment – but wouldn't offer a timeline.

"One of the challenges within Argentina is that it's a relatively new environment for mining," he said.

"So while we were successful in getting Valadero up and running in San Juan province, the complexity of Pascua is putting a burden on regulators. We're honestly being held to a higher standard than we've ever seen before anywhere in the world."

Still, he added: "It's not an issue of `Do they want it?' They absolutely do."

Barrick shares traded down $1.03 or 2.45 per cent at $40.97 on the TSX Thursday, with 1.4 million changing hands.

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